Comments on: Debunking Henry Blodgethttp://www.thesimpledollar.com/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/
Financial talk for the rest of usWed, 17 Jun 2015 14:27:21 +0000hourly1http://wordpress.org/?v=4.0By: Brianaryhttp://www.thesimpledollar.com/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-203458
Wed, 12 Mar 2008 04:54:59 +0000http://www.thesimpledollar.com/2007/04/13/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-203458Are you seriously assuming that the inflation rate is only 3%? I don’t know about you, but the amount I spend for all of the same goods has gone up much more than 3%/year in the last ten years.
]]>By: CMBhttp://www.thesimpledollar.com/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-20376
Tue, 24 Apr 2007 14:49:36 +0000http://www.thesimpledollar.com/2007/04/13/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-20376I looked at the OECD PDF link you posted. It states that

“The household
saving ratio must therefore be calculated as the
ratio of household saving (B.8 – SNA 93 code)
divided by household disposable income (B.6) plus
the adjustment for the change in net equity of
households in pension funds (D.8). The United
States has chosen not to follow the SNA 93
treatment…Consequently,
the adjustment item is not required and the
traditional definition of the household saving ratio
still applies.”

And a little earlier
“The household saving ratio has traditionally been
defined as household saving divided by household
disposable income.”

So basically it is using the NIPA calculation to determine household savings. Even the federal reserve board says that this way of measuring “savings” is flawed:

“…the NIPA personal
saving rate gives an incomplete picture of household
savings behavior. For example, the NIPA measures
of income and savings exclude the sale of or
change in the market value of existing assets. For
financial assets, personal income does include dividend
and interest income to persons, but excludes
capital gains and losses.”

Savings rates might very well have gone down because the savings that were “waiting” for investment are now invested. Perhaps if the tax rate were lower investment would be higher; perhaps not. Either way, I don’t think either Blodget or you can definitively conclude a cause and effect here based on these simple studies.

]]>By: Trenthttp://www.thesimpledollar.com/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18855
Tue, 17 Apr 2007 16:22:17 +0000http://www.thesimpledollar.com/2007/04/13/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18855Since the 1970s, the income tax rate has gone from 14-70% (depending on bracket) to 10-35% (depending on bracket), a drastic reduction (see http://en.wikipedia.org/wiki/United_States_Income_tax). At the same time, just since 1990, the savings rate in the United States has HALVED (http://www.oecd.org/dataoecd/53/48/32023442.pdf). To claim people aren’t saving because of oppressive taxes is nonsensical. The numbers show that as tax rates have gone down in the United States, so have savings rates, so it’s a fool’s game to conclude that further tax reductions would increase savings.
]]>By: CMBhttp://www.thesimpledollar.com/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18840
Tue, 17 Apr 2007 14:38:22 +0000http://www.thesimpledollar.com/2007/04/13/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18840Trent,

I’ve been reading your blog for about six months now, and it’s pretty clear you know what you are talking about. Thus, it is disappointing that you have grossly misrepresented Blodget’s article in the way you did. As Amy and Ian have pointed out, Blodget was arguing for a change in the tax system, not telling people to spend all their money. I have not seen you stoop to name calling and political bickering before-what does it accomplish now?

Would you care to cite references for the following statements?

“The reason people spend like gangbusters and don’t save doesn’t have anything to do with capital gains tax.”

“Taxation as a whole has never been lower than it is now since its inception, yet somehow savings rates are at their lowest point, too?”

]]>By: AllFinancialMatters » Blog Archive » The 96th Carnival of Personal Financehttp://www.thesimpledollar.com/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18608
Mon, 16 Apr 2007 11:39:27 +0000http://www.thesimpledollar.com/2007/04/13/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18608[...] 1. Why Henry Blodget Tries To Make Saving A Sucker’s Game [...]
]]>By: Carnival of Personal Finance » Carnival of Personal Finance #96http://www.thesimpledollar.com/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18607
Mon, 16 Apr 2007 11:21:20 +0000http://www.thesimpledollar.com/2007/04/13/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18607[...] Why Henry Blodget Tries To Make Saving A Sucker’s Game – And Why You Shouldn’t Believe Him [...]
]]>By: Trenthttp://www.thesimpledollar.com/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18419
Sun, 15 Apr 2007 17:18:20 +0000http://www.thesimpledollar.com/2007/04/13/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18419Amy, you say “Blodget’s thesis is essentially that simple investments barely break even over time because of taxes and inflation, while other investments are often too complex, too costly, or too inflexible to be of use to many Americans. He suggests that creating a more accessible, tax-advantaged savings vehicle would have a positive impact on the savings rate. Would you care to disagree with this?” Yes, I disagree strongly. Taxation as a whole has never been lower than it is now since its inception, yet somehow savings rates are at their lowest point, too? Again, it’s not taxes that are to blame here unless you’re an anarchist.
]]>By: Trenthttp://www.thesimpledollar.com/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18416
Sun, 15 Apr 2007 17:15:57 +0000http://www.thesimpledollar.com/2007/04/13/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18416Amy, Ian, Hanmeng: Obviously, lower taxes on savings would be an encouragement to save more. No income tax at all would be great, too. The problem is that it’s not realistic.

The article is also ignoring the fact that compared to inflation, taxes aren’t eating much of investment returns at all.

The reason people spend like gangbusters and don’t save doesn’t have anything to do with capital gains tax.

]]>By: hanmenghttp://www.thesimpledollar.com/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18397
Sun, 15 Apr 2007 15:57:38 +0000http://www.thesimpledollar.com/2007/04/13/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18397Yeah, Amy & Ian are right; the thrust of Blodget’s article is that current tax laws are a poor incentive for saving, and so people who don’t save are acting rationally. He is by no means advising people to do this.

]]>By: Ianhttp://www.thesimpledollar.com/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18158
Sat, 14 Apr 2007 15:24:33 +0000http://www.thesimpledollar.com/2007/04/13/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18158I agree with Amy. Blodget isn’t arguing that you should spend. He’s arguing that current tax laws provide a strong incentive to spend, and that they should be reworked to provide more incentives to save.

This guy agrees with you.

]]>By: jshttp://www.thesimpledollar.com/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18153
Sat, 14 Apr 2007 15:07:05 +0000http://www.thesimpledollar.com/2007/04/13/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18153Actually some of his advice on how investments in non-tax sheltered mutual funds can cost you a lot of money tax wise is very good (it’s not at all original, but it’s correct nonetheless). But I’ve learned the hard way. I owe, I owe (the IRS and the state), so it’s off to work I go.
]]>By: KMullhttp://www.thesimpledollar.com/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18135
Sat, 14 Apr 2007 13:42:56 +0000http://www.thesimpledollar.com/2007/04/13/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18135Trent,
Thanks for pointing this out. I had seen the article and … oh wait. Finance advice in Slate. Nevermind. :)
]]>By: Jim Lippardhttp://www.thesimpledollar.com/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18054
Sat, 14 Apr 2007 03:33:09 +0000http://www.thesimpledollar.com/2007/04/13/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18054sean: “So really, you could’ve exchanged some American money for Euros, stuffed THAT under your mattress and made a healthy return over the last year…tax free.”

If you convert those euros back to U.S. dollars, you do owe income tax on the exchange rate gain–it’s not a tax-free gain.

]]>By: ck_dexhttp://www.thesimpledollar.com/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18051
Sat, 14 Apr 2007 03:15:52 +0000http://www.thesimpledollar.com/2007/04/13/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18051Just a clarification: capital gains rates match your federal tax rate if you hold the stocks for less than a year. Ouch, that can be as high as 35%.

And as js pointed out, some states don’t have a separate lower capital gains rate, so you pay regular income tax rates for the state portion (6.45% in KS). Some states like Mass. do have a lower rate for cap gains (5% last I checked) versus regular income tax. (By the way, I cringe when I here people talk about Taxachusetts–we pay way more in the great red state of Kansas).

]]>By: Trenthttp://www.thesimpledollar.com/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18048
Sat, 14 Apr 2007 03:05:01 +0000http://www.thesimpledollar.com/2007/04/13/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18048Amy, it’s not an ad hominem attack. The only part of Blodget’s background that I discuss is the one that introduces bias in his argument: he has an axe to grind against the securities industry. An ad hominem attack would have been if I had called him an adulterer or something.
]]>By: Wallet Rehab - Ways to save moneyhttp://www.thesimpledollar.com/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18031
Sat, 14 Apr 2007 02:18:05 +0000http://www.thesimpledollar.com/2007/04/13/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18031OFten times, it’s a case of vocabulary elitism. SOme people, when hearing terms like “capital gains,” “inflation” and T-bills, automatically assume that the speaker is an expert. They forget to grab the saltshaker for that all important grain of salt.
]]>By: jshttp://www.thesimpledollar.com/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18026
Sat, 14 Apr 2007 01:27:28 +0000http://www.thesimpledollar.com/2007/04/13/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18026If the rate of inflation is greater than the after tax rate of return on investment then spending is better. Whether this is the case, is an empirical matter.

If it is also the case that the stuff you buy is losing money even faster than your money, then it still doesn’t make saving a good choice. In that case instead you should spend on assets that don’t lose money – housing, gold, or spend it on experiences like travel. If you can buy more travel or basket weaving classes or whatever with $1000 today than $1000 plus interest 5 years from now then might as well do it now.

I also really don’t understand about capital gains taxes on dividends, some part of arcane tax law I don’t understand I suppose. I thought dividends and capital gains were two different things. Dividends are taxed as regular income, capital gains at 15% (the 15% is not such a deal though when you add to it a near 10% state tax on all income including capital gains, that I’m paying here in CA).

]]>By: Benjihttp://www.thesimpledollar.com/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18022
Sat, 14 Apr 2007 00:32:18 +0000http://www.thesimpledollar.com/2007/04/13/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18022What I find it so amazing that these dot-com crooks gain employment so easily in the circles of modern day socialists.

The founders of Moveon.org’s founders are a prime example.

]]>By: Amyhttp://www.thesimpledollar.com/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18013
Fri, 13 Apr 2007 23:20:08 +0000http://www.thesimpledollar.com/2007/04/13/why-henry-blodget-tries-to-make-saving-a-suckers-game-and-why-you-shouldnt-believe-him/#comment-18013You may be calling Blodget out for cheap debate tricks, but you’re hardly above using them yourself, starting with the ad hominem attack at the beginning of your post. Then you engage in some cherry-picking yourself, nitpicking arguments against ascribing too much weight to taxes on dividends and suggesting that T-bills are a good investment because they beat cash under the mattress, without addressing the main thesis of his argument.

Furthermore, you appear to lack understanding of how an economist conceptualizes spending. Money is not the end product, maximizing utility, broadly understood, is. We save for the future not to get more money, but to ensure that we have money to continue to transform into a utility stream throughout our lives.

Blodget’s thesis is essentially that simple investments barely break even over time because of taxes and inflation, while other investments are often too complex, too costly, or too inflexible to be of use to many Americans. He suggests that creating a more accessible, tax-advantaged savings vehicle would have a positive impact on the savings rate. Would you care to disagree with this?

Incidentally, the authors of Slate pieces don’t choose the titles of their articles, the editors write them with an eye to maximizing clicks. So there’s often a mismatch between the title and the thesis of the article.

If our currency has depreciated with respect to the euro and pound, our imports (from Europe and England) should begin to reduce in number. From the American point of view, European goods will seem more expensive then they were with the more favorable exchange rate. This will cause American consumers to begin looking elsewhere for their goods. Additionally, this will also increase European imports of American items. It’s somewhat of a self-correcting mechanism, theoretically speaking.

More importantly, most of our imports come from Canada, Mexico, China, and Japan. Our exchange rate with each of these countries should be the true measuring stick. If the dollar has depreciated versus all four of the above nations, we should see total American imports begin to decline.

That being said, I agree that exploiting exchange rates for financial gain is an effective strategy.